How to file for bankruptcy and keep your car?

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Filing for bankruptcy can be a difficult decision, but it may be necessary for individuals facing overwhelming debt. One common concern for those considering bankruptcy is how it will impact their assets, particularly their car. Fortunately, there are options available to help individuals file for bankruptcy while keeping their car. In this article, we will explore the steps and considerations involved in filing for bankruptcy and retaining ownership of your vehicle.

Understanding Bankruptcy

Before delving into the specifics of keeping your car during bankruptcy, it is essential to understand the different types of bankruptcy and their implications. The two most common types of bankruptcy for individuals are Chapter 7 and Chapter 13.

Chapter 7 Bankruptcy: This type of bankruptcy involves the liquidation of assets to repay creditors. However, certain assets, including a car, may be exempt from liquidation under state or federal laws.

Chapter 13 Bankruptcy: Unlike Chapter 7, Chapter 13 bankruptcy involves creating a repayment plan to pay off debts over a specified period, typically three to five years. This type of bankruptcy allows individuals to retain their assets, including their car, as long as they continue making the agreed-upon payments.

Exempting Your Car

When filing for bankruptcy, it is crucial to determine whether your car qualifies as an exempt asset. Exempt assets are protected from liquidation, allowing you to retain ownership even after filing for bankruptcy. The specific exemption laws vary by state, so it is essential to consult with a bankruptcy attorney or research the laws in your jurisdiction.

In many states, there is a vehicle exemption limit that determines the maximum value of a car that can be exempted. If the equity in your car is below this limit, you can usually keep it. However, if the equity exceeds the exemption limit, you may need to explore alternative options, such as Chapter 13 bankruptcy.

Reaffirming Your Car Loan

If you have a car loan and want to keep your vehicle during Chapter 7 bankruptcy, you may have the option to reaffirm the debt. Reaffirming a debt means you agree to continue making payments on the loan, effectively excluding it from the bankruptcy proceedings. By reaffirming your car loan, you can maintain ownership and continue making regular payments as agreed upon.

It is important to note that reaffirming a debt can have long-term financial implications, as you will remain responsible for the loan even after bankruptcy. Therefore, it is crucial to carefully consider your ability to make future payments before reaffirming any debts.

Chapter 13 Repayment Plan

If your car equity exceeds the exemption limit or you prefer to file for Chapter 13 bankruptcy, you can create a repayment plan that includes your car loan. The repayment plan will outline how you will repay your debts over the designated period, typically three to five years.

Under the Chapter 13 repayment plan, you will continue making regular car loan payments while also making payments towards your other debts. The advantage of Chapter 13 bankruptcy is that it allows you to catch up on missed payments and potentially reduce the interest rate on your car loan, making it more affordable to keep your vehicle.


Filing for bankruptcy does not necessarily mean you will lose your car. By understanding the different types of bankruptcy, exempting your car, reaffirming your car loan, or creating a Chapter 13 repayment plan, you can navigate the bankruptcy process while retaining ownership of your vehicle. However, it is crucial to consult with a bankruptcy attorney to ensure you are making the best decisions based on your specific circumstances.


– US Courts:
– Legal Information Institute:
– National Association of Consumer Bankruptcy Attorneys: